Under the Indian banking rules, depositors have to be paid interest for their money in banks, which is not permitted under Islamic banking principles
The Reserve Bank India (RBI) on Thursday said it is considering the possibility of allowing Islamic financial institutions to function as non banking financial companies (NBFCs) since Islamic banks are not permitted under the present laws, reports PTI.
Under the Indian banking rules, depositors have to be paid interest for their money in banks, which is not permitted by Islamic banking principles, RBI Governor D Subbarao told reporters after the central bank's board meeting in Thiruvananthapuram.
RBI, however, was examining the possibility of allowing Islamic financial institutions to function as non-banking finance companies (NBFCs), he said.
Sharia (Islamic law) does not allow charging or paying interest rates.
In India, there are two types of NBFCs—those who accept deposits and others which do not.
Mr Subbarao said the Centre will have to enact a separate legislation in case Islamic banking is to be allowed in the country.
The question on Islamic banking came up in the backdrop of Kerala government taking the initiative to set up a joint venture financial institution based on Islamic banking principles.
The proposal was stayed by the Kerala High Court, while admitting a petition filed by Janata Party leader Subramanian Swamy on the Constitutional validity of the proposal a few months ago.
The boards of ‘Maharatna’ PSUs will have powers to make equity investment up to Rs5,000 crore to set up financial joint ventures and wholly-owned subsidiaries in India or abroad without government approval
The government has approved the ‘Maharatna’ status for NTPC, IOC, ONGC and SAIL but only the power major can enjoy the autonomy that goes with the coveted status for the PSUs, reports PTI.
"The competent authority has approved the grant of ‘Maharatna’ status for IOC, NTPC, ONGC and SAIL," the Department of Public Enterprises said in an inter-ministerial communication.
While the four blue-chip public sector undertakings (PSUs) have been given the new status, only NTPC "has the requisite number of non-official directors on its board and is therefore eligible to exercise the Maharatna powers", it said.
Though the other three companies also met the norms set by the Cabinet on 24th December, their boards do not have the adequate number of independent directors, the DPE said.
"The ministry of petroleum and natural gas and the ministry of steel may take necessary steps to induct the requisite number of non-official directors on the boards of IOC, ONGC and SAIL so that they could also exercise delegated ‘Maharatna’ powers," it said.
The boards of ‘Maharatna’ PSUs will have powers to make equity investment up to Rs5,000 crore to set up financial joint ventures and wholly-owned subsidiaries in India or abroad without government approval.
According to sources, the SAIL board is short of five non-official directors. The steel-maker has started the process of filling the vacancies.
The four firms fulfil the other criteria of a three-year track record of annual net profit of over Rs5,000 crore, net worth of more than Rs15,000 crore and turnover of more than Rs25,000 crore, besides listing on the stock exchanges.
Of the 158 profit-making PSUs, 18 enjoy the ‘Navratna’ status while 62 are ‘mini-Navratnas’. In all, there are 246 PSUs in the Central sector.
"SAIL is poised to play a significant role in the nation\'s development in the years to come. This welcome decision of the government will greatly strengthen our resolve and enhance SAIL\'s capability in the global context," SAIL chairman S K Roongta said.
The names of PK Tayal and his group companies are not there anymore as promoters of Bank of Rajasthan. In fact, there is no promoter mentioned for the Bank on either the BSE or NSE site
Bank of Rajasthan (BoR), which is in the news for its proposed merger with ICICI Bank Ltd, has been embroiled in various controversies in the past. While market regulator Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) had cracked the whip on the erring lender, the exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), seem to be unaware of the filings from BoR.
According to both BSE and NSE sites, PK Tayal and his associated group entities are no longer the promoters of BoR. In fact, as per BoR's filing to the exchanges, there is not a single promoter mentioned for the period to end-March 2010. Surprisingly, names of PK Tayal and eight of his group companies are there under the promoter and promoter group for the quarter ending December 2009.
The Tayal group entities such as 21st Century Entertainment Ltd, Ahmednagar Investments Pvt Ltd, Cumballa Hill Property Developers Pvt Ltd, Cyber Infosystems & Technologies Ltd, Cyberinfo Zeeboomba.Com Ltd, EDC Securities Ltd, Giriganga Investments Pvt Ltd and Sumander Property Developers Pvt Ltd, together still hold 28.61% stake in BoR. However, their names are mentioned in the “public and holding more than 1% of the total shares" category, instead of the "promoter and promoter group" category. In its ex-parte order, SEBI has labelled all these companies as ‘promoter entities of BoR’.
A note posted by BoR on the BSE site said: "Hitherto, Tayal Group holding was shown in the Promoter Category. Based on the legal opinion obtained, they are no longer being treated as Promoter of the Bank. In the absence of any other category for the dominant shareholders group (DSHG), their holding has been shown in the Public Category."
"The declared shareholding of Tayal Group is 28.60%, however, as per SEBI ex-parte interim order dated 8 March 2010, holding of Tayal Group and related entities are to the order of 55.01%," the note says.
The question is how can any group or entity be removed suddenly from one category and placed into another category? That too when the market regulator has clearly said that all these companies are "a promoter entity of BoR". More importantly, is there anyone in the exchanges who keeps a tab on the regulatory filing done by companies? When asked, after more than 24 hours, the BSE asked us to check the lender’s filing on its site.
Following the SEBI ban on about 100 entities related with the Tayal Group, BoR's managing director and chief executive officer, G Padmanabhan, had said that 'technically' the Tayals were not the Bank’s promoters.
"Legal opinion has been obtained that they are not the promoters. The Bank does not consider them as its promoters. They are just dominant shareholders in the bank," Mr Padmanabhan had said.
SEBI was peeved that the Tayals had increased their shareholding in the private sector lender to 55.01% in the October-December quarter of 2009 from 44.71% in the quarter ended June 2007, although they had claimed that they were actually divesting stake. The market regulator also said that while the promoters apparently conveyed the impression that they were reducing their shareholding, they did not, in fact, dilute their controlling stake in BoR.
The SEBI action against the Tayal Group itself came after the RBI appointed Deloitte Haskins & Sells to conduct a special audit of BoR's accounts, suspecting violation of operational norms by the lender, including transparency in lending. The RBI had also imposed a Rs25-lakh fine on the Bank alleging violation of a host of norms.